NU Council considers TIF District for apartment complex

Project started by MLC, now proposed by private developer

April 3, 2013

NEW ULM - The question of whether the City of New Ulm should approve a TIF district for a proposed 50-unit apartment complex will be discussed during the next few months after the City Council approved looking into the issue on Tuesday.

The apartment project is part of the recent development on a site near a portion of the MLC campus. It hopes to attract senior renters from MLC graduates and Wisconsin Evangelical Lutheran Synod retirees. The private business Doneff Companies is running the project and its construction near 5th North and Highland Avenue is tentatively scheduled to begin in June.

Doneff requested a TIF district after a bank indicated the project would not be financially feasible without a TIF district or similar assistance.

James Thomas, representing management of Sunset Apartments in New Ulm, told the council he was concerned about a private business being subsidized by the City if it would compete with Sunset, which is a nonprofit business. Sunset Apartments, which was originally for senior citizens, is severely limited in what it can do about rental rates due to heavy regulation, Thomas said. Although he is not necessarily opposed to a TIF district, he urged the Council to consider whether the project is a good idea for the city.

City Manager Brian Gramentz said the motion, which was unanimously approved by the Council, only allows the City to charge Doneff the cost of looking into the negatives and positives of the development. The entire process would take four months to complete if the Council choses to proceed, Gramentz said.

TIF districts operate by having the recipient pay regular property taxes, then be reimbursed a portion by the county. The process would not cost the City. The intent behind TIF districts is the projects are not a loss of property tax revenues, because they are targeted at projects that would not have happened without the assistance.

Tax Forfeiture Sale

The Council approved Brown County's plan for selling the property obtained through tax forfeiture of the Dakotah West Subdivision and the Minnesota River Valley Subdivision.

Because the property was not sold and taxes were not paid on the properties, the City must cover the unpaid special assessments. The sale is aimed at recovering money for the special assessments. The proceeds beyond covering unpaid costs will be split among the taxing authorities of the City, Brown County and District 88.

The individual lots will be auctioned off on April 30, with the lots being sold individually. However, the entire Dakotah West Subdivision can still be bought before the auction if an interested party contacts and buys the property from Brown County.

Legislation Support

The Council also approved official support for two bills in the Minnesota Legislature that could benefit New Ulm.

The first bill proposes reforms to Local Government Aid (LGA), which also increases the state's total appropriations by $80 million. The new formula would be less complex and consistent with its funding levels, as compared to the current system. It also calculates the LGA funds distribution based on a city's needs and adds a formula that would keep pace with inflation.

Gramentz said the City supports the bill because the current system prevents it from accurate budgeting. Furthermore, New Ulm would get a slight increase in total funding over several years.

The second bill will allow Minnesota cities to establish Municipal Street Improvement Districts, The Council's resolution is only based on passage of the bill. City participation would be voluntary.

The program would allow the City to designate a specific area as a district and set up an annual fee for future street repairs. It would be less burdensome than special assessments. It would save money by not requiring bonding for the street repair funds, because the fees would be paid before a project begins.

The Council noted that if the bill does pass, it will hold discussion on implementation of the program. One issue is how to be fair to people who paid the fee, but moved before the project is completed.